After the innotribe stuff, it was off to a panel debate about “payments innovation”.
This session was described as follows:
“The crisis has put the emphasis back on traditional banking and sources of revenue, with payments coming to the fore again. Yet payments are also seen as a commoditised, legacy business where scale is everything. Into this business come a series of new market demands which might change this such as same day retail payments, e-payments, mobile payments, contactless cards and real-time finality. How will these new opportunities develop and will they be profitable new forms of business? Can banks afford to develop new channels individually or will they need to co-operate further? Will non-bank players use technology to challenge banks for their new payments service business?”
Bearing in mind that innotribe was all about innovation, it is obvious why this session was of interest to me.
This session was chaired by Robert Heisterborg, Global Head of Payments and Cash Management at ING, with a panel comprising:
- Rajesh Mehta, Managing Director, Head of Treasury and Trade Solutions, EMEA Global Transaction Services, Citi ;
- David Sear, Divisional Managing Director, Travelex Global Business Payments ;
- Marcus Treacher, Head of electronic banking and e-Commerce, Global Transaction Banking, HSBC; and
- Russ Waterhouse, Executive Vice President of Products and Development, The Clearing House.
Here's a summary of how it went:
Who’s driving innovation?
The innovation drivers I can see include:
- the miniaturisation of payments – especially as there’s more P2P taking place;
- government’s needs, especially in current economic climate;
- banks seeing payments as a product rather than looking at payments as a business in its own right, which is what non-banks do;
- regulatory change; and
- risk management.
Citi in particular is focusing upon prepaid cards and mobile as key new innovation areas.
Often the idea of the innovator is not the way it works in reality. My favourite example is the ATM which was introduced as an automated teller in branches and it failed. In desperation, the developers decided to try the machine outside the branch and it took off. That was an accident, but one that created success.
As a market infrastructure we’re the last place people would normally look for innovation, but we have to do this because it is required, expected and needed amongst our clients and community. The challenge to do this is that many of us benefit from the inconsistencies in the markets, and we have to rethink our business models if we are to take advantage of creating innovation through more consistency.
When we refer to payments innovation, the only example normally mentioned is PayPal and I’m a little tired of hearing about PayPal. They’ve been around over ten years now, so get over it. PayPal have a billion dollars of revenue in Europe alone so their innovation has happened, they have achieved change and they’re here to stay.
Now, as a consumer, I may not want PayPal because I find it difficult to use. It’s clunky and doesn’t provide me with the security I want. For example, a recent US survey by Nielsen found that 81% of consumers would prefer a P2P payment instrument provided by their bank. So we have to do a little better particularly as there is a trillion dollars of ecommerce out there each year, and 20% of that is cross-border.
Prepaid cards are becoming a mainstream in the payments landscape, and that’s another key innovation we are tracking.
Equally, I’ve heard lots of people talking about convergence this week and I’d like to see that. In particular, I would like to see the end of the back street money transfer agent. Bank2Bank and Card2Card services, such as Visa money transfer cards, should mean that AML will go away into a different place.
Robert Heisterborg then asked the audience: “We have been here for a week, is there enough innovation at SIBOS?” and over 80% of the audience said ‘No’. Where were all of you when the innotribe sessions were running all week????
We then started looking forwards to the future of payments.
The future landscape for payments will fall into three camps:
- Large global players with the advantage of scale;
- Niche specialist players with a vertical focused advantage, e.g. payment practitioners for the health industry or the pensions industry; and
- Hybrids who are capable of innovating themselves but acquire capability, distribution and technologies from partners who do this better than we do
Robert Heisterborg then referenced an ING trial in m-payments in Romania that found the average transaction value of a mobile payment to be €2.44. Therefore, is mobile the cash killer?
A decade ago we talked about micropayments killing cash on the internet and it hasn’t happened. For example, Google has announced a micropayment service for content recently but these sorts of developments are all about ‘if we build it, they will come’. It’s not what consumers want though. Consumers don’t want to pay for content and Google’s announcement of micropayments for content will therefore not necessarily work.
How can you say that David when, in Africa you have four times the number of mobile telephones than bank accounts? How come you don’t think m-pay will happen?
Because consumers are asking for other forms of payment that are more traditional, such as prepaid cards in Africa rather than mobile.
What will drive the mobile is banking the unbanked rather than the payment itself. However, once banked, then mobile payments will come.
The audience were then invited to ask questions and the first was about the fact that Nokia have 1.3 billion telephones out there and relations with all the carriers. The fact that they’ve partnered with Obopay should be seen as a threat should it not?
No, as they are working with the banks on this. We’ve created a financial cloud at Citi for example, as a super settlement mechanism for the kind of needs of Nokia. It’s a settlement and clearing role and there’s always going to be collaboration with a bank on these things, so the question is really about the last mile. The last mile is all about who wants the connection for something as ubiquitous as a toothbrush, which is what the mobile is these days. For this, do I need to own the last mile? Do I need to compete with others there? Or do I enable that capability and collaborate? There’s always room for collaboration.
All in all, it was an interesting discussion but the fact that the panel talked mainly about prepaid and mobile, but no real discussion of SEPA innovations around einvoicing or contactless payments was an oversight, so I asked about contactless.
Of course, the panel said that it was not purposefully missed off the list, and that this is going to be embraced.
My take on this: for ING, Citi and HSBC, contactless technology is still off the radar or it would have been referred to more strongly. Would have been interesting to see Octopus or Barclaycard or Visa PayWave or others, as thee form factor of contactless mobile or contactless watches (forget cards) is far more innovative as a consumer payment service than a mobile payment using SMS or something (which is where most banks focus first).
Net:net, and being honest, there was no real discussion of innovations here but the panel talked more about stuff that has been bubbling away for years in the form of prepaid cards and mobile payments. Even if they had talked about SEPA einvoicing and contactless, it’s not really innovatory.
What would be truly innovatory would have been to discuss the next generation of payments using wireless technologies to pay without any physical devices involved.
Now, that is revolutionary and I’ve got a whole nine yards on that innovation.
Anyone wanna hear it?